NARCL Buys Its First Bad Loan

The asset reconstruction firm bought the bankrupt Jaypee Infratech Ltd. from a group of bankers led by IDBI Bank.

<div class="paragraphs"><p>Indian rupee banknotes.&nbsp;(Photo: Rupixen/Unsplash)</p></div>
Indian rupee banknotes. (Photo: Rupixen/Unsplash)

National Asset Reconstruction Co., India’s bad bank, closed its first bad loan sale last week.

The asset reconstruction firm purchased the bankrupt Jaypee Infratech Ltd. from a group of bankers led by IDBI Bank Ltd., according to two bankers aware of the development. The total bank exposure in this account was approximately Rs 9,000 crore.

Lead lender IDBI Bank had an exposure of Rs 3,750 crore toward the account. The sale was completed at a net asset value of 45%, said Rakesh Sharma, managing director and chief executive officer at IDBI Bank.

"We were awaiting some clarifications from the government on the security receipts. The transaction was closed last Friday," Sharma said.

The sale was concluded under the 85-15 scheme, where lenders were paid 15% of the net asset value in cash while the rest was paid in government-guaranteed security receipts.

IDBI Bank received Rs 251 crore worth cash in this transaction, a second banker confirmed on the condition of anonymity.

The lender is looking at selling another Rs 6,000-7,000 crore worth of bad loans to NARCL in the coming months, Sharma said.

Jaypee Infratech was part of the 12 bad loan accounts referred to the National Company Law Tribunal in June 2017 under orders of the Reserve Bank of India. It has been facing insolvency proceedings since then.

The company has been in the last stages of insolvency proceedings since June 2021. Suraksha ARC was selected as the winning bidder by lenders through a vote. However, the NCLT has yet to clear the resolution plan.

From hereon, NARCL will be acting as the sole financial creditor for the account, the second banker quoted above said.

The NARCL was created in October 2021 as a way to reduce the burden of legacy bad loans in the banking system. However, it has seen inordinate delays in starting out.

The India Debt Resolution Corporation Ltd. will act as an asset manager for NARCL and will employ recovery measures in companies purchased by the ARC.